H&M: green field market entry to Japan, opens first Japan store in Tokyo – Ginza on September 13, 2008

H&M entered Japan’s fashion market initially using a green field strategy, opening stores. On September 13, 2008, H&M opened the first store in Japan in Ginza, and is planning two more stores in Shibuya (see picture below) and in Harajuku.

H&M adapted it’s global way of doing things to Japan’s market needs – for example, H&M introduced “Quality Managers& in it’s Japan store, in order to match Japan’s consumers high expectations for quality (and I guess also to avoid problems with Japan’s recently introduced product liability laws).

One week after opening, customers are queuing in line to enter the store – typical waiting time is about 2 hours, daily number of visitors to the store are estimated ot be about 8000/day.

Closest foreign competitors in Japan include US retailer GAP, and Spanish retailer Inditex (Diseno Textil SA)’s ZARA.

Biggest Japanese competitor is Fast Retailing’s UNIQLO.

H&M is preparing to open the second and third stores in Shibuya (photo below) and in Harajuku.

Our comments:

H&M has had a very successful start and has created a successful opening “event”. To be successful longterm H&M will have to:

  • sufficiently tune to Japan,
  • continue to innovate,
  • compete successfully especially with UNIQLO
H&M opening in Ginza
H&M opening in Ginza
H&M's building in Ginza
H&M’s building in Ginza
H&M in Tokyo-Ginza
H&M in Tokyo-Ginza
H&M building the second store in Tokyo-Shibuya
H&M building the second store in Tokyo-Shibuya

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Bigger than any recent EU investment in Japan: Iscar Ltd of Israel acquired Japanese tungsten carbide tool maker Tungaloy for US$ 1 billion

The Israeli company Iscar has completed the acquisition of Japanese competitor Tungaloy Corporation. Iscar acquired more than 90% of outstanding shares for around US$ 1 billion from Nomura Principal Finance Co.

Iscar is the world’s second largest maker of tungsten carbide cutting tools, and competitor Tungaloy is the world’s fifth largest. Iscar is controlled by Warren Buffet’s Berkshire Hathaway Inc. – Berkshire Hathaway acquired 80% of Iscar for US$ 4 billion in 2006.

The merged Iscar and Tungaloy will be better positioned to compete with global leader Sandvik AB, which has sales on the order of US$ 4 Billion.

Tungaloy Corporation emerged via a management buyout from Toshiba Tungaloy, with Nomura Principal Finance Co. as the largest share holder. Tungaloy has sales of YEN 50 Billion (approx. US$ 500 million), was founded in 1934, and has 2618 employees. Tungaloy is the fifth largest maker of Tungsten Carbide cutting tools in the world.

Iscar entered Japan’s market by opening a 100% owned subsidiary company in 1994, about 14 years ago.

To my knowledge this acquisition is also far larger than any acquisition in Japan by any European Union (EU) company this year (last year, in 2007 Permira announced the acquisition of Arysta LifeScience Corporation for US$ 2.2 Billion and completed the deal during 2008). The three largest acquisitions ever of Japanese companies by EU companies have been Vodafone’s acquisition of J-Phone (transaction value: about US$ 20 Billion), Daimler’s acquisition of Mitsubishi Motors (transaction value: about US$ 2-3 Billion), and Renault’s investment in Nissan (initial transaction value: about US$ 3 Billion) – of these three, only the Renault investment in Nissan was successful, the other two failed.

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